Banking in the United States

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History of Banking

Banking has been practiced for at least 4,000 years, mostly by individuals, families, and countries. Clay tablets from around 2,000 BC show that the ancient Babylonians deposited their wealth in banks, paid service charges, and borrowed money.

The rise of empires and commerce sped the development of banking. In ancient Rome an entire street, the Street of Janus, was set aside for exchanging foreign currencies, obtaining loans, and other bank activities. In the Middle Ages many bank activities were stopped because the Roman Catholic church had laws against the practice of lending money, known as usury. By the time of the Renaissance international trade had revived, leading to a growing need to exchange money.

In the late 16th century two cities in Italy, Florence and Venice, became great banking centers. As other centers of trade arose throughout Europe, banking systems needed to be set up. The Bank of Amsterdam opened in 1609, and in 1656 a public bank opened in Sweden that issued the first bank bills, which replaced the use of copper coins.

In England goldsmiths served as bankers until the Bank of England was founded in 1694. They stored money and other valuables for customers, and they exchanged foreign currency. These goldsmiths saw that deposits and withdrawals usually balanced each other out because customers withdrew only the money they needed from day to day. The goldsmiths realized that they could lend the remaining money at interest without harming their customers' savings. These practices led to the modern form of banking: taking deposits, loaning money, and keeping money in reserve.

The first banks in the United States were the Bank of North America in 1782 and the Banks of Massachusetts and Bank of New York in 1784. In 1791 Congress gave a charter to the first Bank of the United States, founded by Alexander Hamilton, the first secretary of the treasury. Other banks in the nation opposed the Bank of the United States, and Congress refused to renew its charter in 1811. A second Bank of the United States was chartered in 1816. In 1832, however, President Andrew Jackson vetoed the bill to renew its charter because he did not believe the bank should be a monopoly, or a company without competitors. The bank was completely dissolved during a financial crisis in 1837.

In 1863 the National Bank Act allowed banks to organize under national charters and to issue bank notes. The main purpose was to secure credit for the government during the American Civil War. One year later the government established the Department of the Treasury, which started the office of the Comptroller of the Currency. The comptroller oversaw state banks.

Many changes in the banking system arose from financial crises. In 1933 thousands of banks failed in the midst of the Great Depression, a financial crisis that led to mass unemployment and many business closings. Congress wrote laws to protect the money that people deposited in banks. One of those laws established the FDIC.

After World War II U.S. banks were the largest and most powerful in the world for several decades. By 1990, however, the growth of other economies had led to the rise of powerful banks in other countries. Most of the world's largest banks by that time were in Japan and Europe.

A number of innovations in banking arose in the United States in the second half of the 20th century. In the 1960s many banks installed drive-up windows for customers who did not want to stand in line. Banks also began to issue credit cards, which allowed customers to buy goods on credit from retailers. These cards were nationally recognized by the 1970s. In that decade banks began allowing customers to manage deposits and withdrawals through automated teller machines, or ATMs. The rise of personal computers in the 1980s and 1990s led to computerized banking, which allowed customers to pay bills, transfer funds between accounts, and perform other activities over the Internet using their computers.

Дата добавления: 2014-11-29